LOOK: Diageo Buys This Filipino Rum Brand for $473 Million
Diageo, one of the global leaders in the spirits industry, announced that it has made another major purchase—the proud Filipino premium brand, Don Papa Rum.
Housing the likes of Johnnie Walker, Captain Morgan, Smirnoff, and Bailey’s, the British spirit company Diageo bagged Don Papa Rum in a multi-million dollar deal. The acquisition is announced to be completed in the first half of 2023—helping the super-premium Filipino dark rum brand solidify its international presence.
Although the initial amount of $280 million will be paid upfront, Diageo adds that this may increase further, depending on the brand’s performance. “The upfront consideration is €260 million with a further potential consideration of up to €177.5 million [around $191.7 million] through to 2028—subject to performance, reflecting the brand’s current growth potential,” the global brand writes in a statement.
Why Diageo Decided to Acquire Don Papa Rum
According to a report from Statista, the revenue in the spirits segment in 2023 can go up to $537.10 billion, with a compound annual growth rate (CAGR) of 5.97% from 2023 to 2025. The market and consumer data provider further added that the spirits market is currently being driven by “premiumization” rather than volume consumption—quality over quantity, so to speak.
With that being said, premium brands now have a better shot at the playing field, since there is now a higher demand for them. Don Papa, for example, has been one of the frontrunners in the spirits industry, especially in the US and Europe. And although the rum segment in Europe posted 18% CAGR from 2016 to 2021, Don Papa outperformed the European rum market by posting 29% CAGR.
Given these numbers, Diageo saw great potential in the Filipino brand—thus lining it up in their “super-premium plus” products, as they try to dominate the premiumization of the rum segment.
“We are excited by the opportunity to bring Don Papa into the Diageo portfolio to complement our existing rums. This acquisition is in line with our strategy to acquire high growth brands with attractive margins that support premiumization, and enables us to participate in the fast-growing, super-premium plus segment,” John Kennedy, President of Diageo Europe and India says.
Likewise, the acquisition announcement had a positive impact on Diageo. Since the buyout was made public last January 17, Diageo ($NYSE: DEO) peaked at $185.96 per share at NYSE, with a spike of 1.53%.
The Cult Following of Don Papa Rum
While Don Papa is a well-known rum brand here in the Philippines, it too has attracted a large following abroad. “There’s a biker gang in Corsica that’s obsessed with Don Papa, and many French fans are tattooed with the image from the Don Papa bottle. A lot of French nurses are big fans of Don Papa. There are many Don Papa obsessives in the Czech Republic,” accounts Don Papa founder Stephen Carroll.
Hailing from the Philippine’s Sugarlandia, Negros Occidental, Don Papa prides itself as a producer of premium, aged small-batch rum. Founded in 2012 by Stephen Carroll and Andrew John Garcia, Don Papa Rum has set foot in 30 countries, with France, Germany and Italy being its largest markets.
Don Papa’s rums have a unique flavor profile—very distinct from the usual Cuban rums. More on the sweet side, with tastes of vanilla, honey, caramel, and fruits, it has become the new favorite of European consumers. In fact, Europeans like the Filipino rum brand so much that many of them have inked the iconic bottle on their skin eternally!
Aside from the fine taste of the rum, Europeans are also magnetized by its beautiful bottle and label. In fact, the packaging has won awards from the Paris Cocktail Spirits Show and the San Francisco World Spirits Competition.
But more than the premium rum and good design, Don Papa’s origins stem from a meaningful history. The rum’s iconography is inspired by Papa Isio, a Filipino sugarcane farmer who advocated for liberation from Spanish colonial rule during the 1890s. Eventually, he became the founder of Negros Republic, where Don Papa’s high-quality ingredients are homegrown.
What’s Next for Don Papa
Through this acquisition, expansion and growth are just some of the things that Don Papa can expect for itself. “Diageo has a strong track record in nurturing founder-led brands,” says Carroll. “They believe in our unique story and have genuinely embraced our brand idea. We believe this acquisition is a great opportunity to take Don Papa into the next exciting chapter of its development.”
Though Don Papa is now under a global umbrella company, the founders will be still involved with the local brand. In fact, they will be working closely with Diageo to set Don Papa on a greater international stage and further grow the rum’s potential.
“The acquisition will be funded through existing cash reserves and is expected to close in the first half of 2023,” Diageo says in a statement. “The company will be available to discuss the transaction in more detail after the release of Diageo’s fiscal 23 interim results on 26 January 2023.”